My Engineering Business Loan Application Got Rejected
Having a business loan application rejected can feel like the end of the world for many construction and engineering business owners, especially when you were counting on that loan to cover a major cost of your business. If you are unlucky enough to experience this kind of rejection, then finding out the reason is essential, so you can improve or change the issue before you reapply. Some bankers will be very specific as to why you got rejected, whereas other won’t.
However, it is actually a legal requirement to provide you with the reasons. If this has happened to you or you are worried that it may happen to you in the future, then understanding the reasons why you may be rejected is the first step to avoiding this nightmare scenario. The following is here to help engineers and industrial companies understand the dynamics of business loan application.
Here are 5 factors that might jeopardize your engineering business loan application:
Your Credit Score
A low credit score, whether it’s a personal or business credit, is the main reason a business loan is rejected. The acceptable score will vary between lenders, so making sure you compare business loans through a site like Become before you apply is advisable. If you have low credit, then make sure you take the necessary steps to fix it before you apply for a loan.
The Age of Your Business
If your business is quite new, then you may not have enough business credit built up to qualify for a business loan. Whenever you use a new vendor or supplier to set up an account, make sure your payments are reported to ensure your business builds up a good history of credit. Again, the amount of time your business should have been running before you can qualify will depend on the lender.
Lack of Collateral
The majority of traditional lenders will want you to put down collateral before your business loan is accepted. If you don’t have enough or don’t have the right collateral, then you may get rejected. If you find yourself in this position, you will need to look at different kinds of financing, such as unsecured loans.
High Debt Utilization
In most cases, lenders won’t want you to use over 30% of the total credit you have available to you. If you do use too much, then lenders may think that you are overextended, and will worry that you won’t be capable of paying them back. However, a lack of debt or credit history can also count against you, so make sure you keep track of your credit limit totals, including both business and personal credit cards, lines of credit and other sources of credit and make sure your debt usage is reasonably maintained.
Your Industry
Some engineering industries will be labelled as risky by some traditional lenders, for example, oil and gas fall into this category due to fluctuation of the global oil and gas prices on a regular basis. If your industry offers high mortality risk like mining, getting a loan may be harder and you will most likely face more hurdles than a regular industrial business would. Making sure you find a lender that will accept your industry is essential before applying.
As long as you do your research into the different loan companies and the rules each lender has, plus you make sure you have a good image on paper and follow the lender’s rules before you apply, then the chances of your loan being rejected will be very slim.
